Profits First method. The reason we need this is that we need to rule money, not have it rule us. We need to tell the money where to go, or it will grow legs and walk away on its own. In a nutshell, when money comes in, you automatically send a percentage to separate accounts you’ve set up for profits, your pay, taxes, and operational expenses. The bible says:
Cast your bread on the surface of the waters, [be diligently active, make thoughtful decisions], for you will find it after many days [be richly rewarded]. (ECCLESIASTES 11:1)As a business owner, you must make diligent decisions with your money. The same way I wouldn’t let my 2-year-old son make his own decisions, you shouldn’t let your money come in without a plan behind it. Taking the ideas from the Profits First method, I’m going to share exactly how I divide up money when it comes in. I highly recommend you read the book for yourself so you can build a customized plan based on your revenue and goals. Like I mentioned before, when money comes into my account, I automatically divide it up into operational expenses, taxes, my pay, and profits. Here’s the plan. Operational Expenses (55%) This is the money needed to run the business. This is your rent, employee Pay, vendors, software, utilities, etc. If you can’t run your business with 55% of the revenue coming in, you likely aren’t charging enough, or your costs are too high. You need to make some adjustments. Taxes (10%) A percentage of your money will go to taxes. It’s better to put the money away each month than to be left with a big bill at the end of the year that you’ll have to scramble (or cheat) to pay. Owners pay (30%) I pay myself 30 percent of the money that comes in. What’s the point of owning a business if I’m not going to have money to pay my bills? And if you can’t pay yourself this much, then once again, something is wrong with your pricing or business costs. You must keep your formula the same and instead look at your revenue and expenses and begin to make changes. Don’t sacrifice your pay! Then what’s it all for? Profits (5%) This is my favorite account to watch grow. This money forms the backbone of my company and helps me make purchasing decisions for cool new upgrades I want to make for my business. Money here goes towards the future of my business.
I’ve shared a system that I use for my own business that has helped me get out of debt and be excited to own a business. I was excited before, but now I’m excited because I’m the best financial manager for God that I can be. Once we all start getting in the habit of telling our money where to go, we open up God’s financial blessings over our businesses. Imagine if we all were great stewards of the money coming into our business? How much more would God bless us with if we were diligent with our finances like he commands us to be? Godpreneur Money Rule #18: God wants us to develop systems in our business of dividing up money so we can experience financial freedom and wealth.]]>